Brian Gibson is the Wilson Family professor at Auburn University’s Raymond J. Harbert College of Business. He is also executive director of the Center for Supply Chain Innovation.
The past four months have been unprecedented in the supply chain world—an understatement you might say! It’s not just that the ongoing global pandemic has laid bare the complexities and vulnerabilities of modern supply chains. There has also been unprecedented media attention paid to supply chain management. For better or worse, now the whole world knows about supply chains. In particular, warehousing and distribution have been brought out of the shadows and into the bright media lights for the critical role they play.
The upcoming edition of the “Logistics 2030” (L-2030) report, sponsored by JLL and CenterPoint, will focus on the growing importance of warehousing and distribution and the strategic direction they will take over the next decade. The annual study is conducted by the Center for Supply Chain Innovation at Auburn University in partnership with the Council of Supply Chain Management Professionals (CSCMP), the National Shippers Strategic Transportation Council (NASSTRAC), and AGiLE Business Media (publisher of DC Velocity and CSCMP’s Supply Chain Quarterly). This year’s report is based on multiple in-depth focus group discussions with leading supply chain executives and survey responses from a wide range of supply chain professionals. The release of the Logistics 2030 warehousing report and a related panel discussion are scheduled for August 20 at the fourth annual Fusion 20/20 Supply Chain Symposium (www.auburnscm.org/events).
The focus group meetings and survey results highlighted a key point: Even before the onset of COVID-19, the role of warehousing and distribution had been in transition from supporting downstream supply chain functions to operating as a frontline service provider to end customers.
This is quite a turn of events. Historically, warehousing and distribution were considered a cost center by business executives—a function that needed to be economized. But this view is now changing. A large majority (80%) of survey respondents in our L-2030 study point to a shift in the way top management in their firms think about warehousing and distribution. They are now recognizing the business value warehousing and distribution can provide. We notice a near consensus among survey respondents (88% agree) that warehousing and distribution will be an organizational priority by 2030. (See Figure 1.)
[Figure1] A changing perspective of warehousing and distribution Enlarge this image
The shift is on
A key trend underlying the new value proposition for warehousing is the ongoing shift in the supply chain structure. Supply chain executives in our focus groups point to the decentralization of supply chains arising from the need to push inventory closer to the customers. As one respondent said, “We’re going to be relocating facilities closer to customers in response to the need for faster deliveries. We’re going to put facilities in multiple places as opposed to just being at the most geographically central place.” Survey results indicate that firms’ push for forward inventory placement will continue into the next decade. The use of retail stores to fulfill e-commerce orders is expected to double. Additionally, 68% of respondents expect to see an increase in the use of local fulfillment centers and a 51% increase in regional distribution facilities by 2030.
Developing a decentralized warehousing and distribution structure requires major investments in infrastructure and technology. A big part of these future investments will be targeted towards expanding firms’ distribution networks. Eight-five percent of survey respondents expects a significant increase in corporate funding to improve warehouse and distribution. These investments will go towards developing key capabilities deemed essential in the coming decade: expanding distribution networks (71% of survey respondents agree), incorporating flexibility in capacity and warehousing operations (68%), leveraging automation for speed (62%), and cutting distribution costs (61%).
Our discussions with focus group executives highlighted a key capability deemed critical in the coming decade – flexibility in adjusting warehousing and distribution capacity. The importance of this capability is rooted in the need to respond to the ever-shifting whims of customers, now and in the future. Firms are investigating ways to be nimble by adjusting their supply chain capacity to match the continually changing demand patterns. “We’re looking at logistics facilities that are flexible in size, construction, and attributes geared towards a cross-dock-like capacity,” explained one respondent Thereby, a necessary capability in warehousing and distribution would be the agility to expand (and shrink) capacity quickly.
Embrace the tech
We asked focus group executives and survey participants how they planned to implement their decentralized distribution strategy. A clear consensus (supported by 93% of survey respondents) is that firms are looking to leverage technology as a catalyst to upgrade their warehousing and distribution processes.
In our study, we noticed a clear change in the conversation around technology that went beyond the typical issues of acquisition costs and implementation pains. We found supply chain executives to be focused more on a broader return on investment (ROI) perspective. One executive highlighted this point as follows: “We know that warehouse labor isn’t going to get any easier to recruit or retain. So as soon as we can justify ROI to replace labor with technology, we’re ready ‘to swing the bat’.”
Another element of this new conversation is the need for execution speed. One executive articulated this point as follows: “So in our [distribution centers] (DCs) we’re investing in ways to unload faster [and] load faster to make fulfillment of things faster so that we can do more with less people.” The cost-benefit analysis for technology solutions is starting to tilt towards a favorable business case for early adoption. “The economics of technology and what you consider in terms of labor availability and how far you’re willing to think about cost escalation or things like healthcare and fringe benefits. I think it’s changed the game in terms of the business ROI,” said one executive.
Our survey results indicate a high use of order management system by 2030 (71% of respondents agree). This software would align inventory and customer orders for fulfillment and shipping across multiple channels. Another big increase is expected in the use of warehouse execution systems (from 16% currently to 61% in 2030) that can provide a real-time coordination of labor and equipment for automated picking, packing, and shipping. Based on the survey results, we project that more firms will start using traditional warehouse management systems (an increase of 67%) by 2030.
In response to our survey question about technologies that have the most potential to disrupt warehousing and distribution, supply chain professionals identified the following: predictive and prescriptive analytics, automated guided vehicles, automated storage and retrieval systems, and automated conveyor systems. It is interesting to note how these technology choices align with automation, capacity expansion, and speed of distribution; all of which support operationalizing the emerging decentralized supply chain structure mentioned above.
In conclusion, warehousing and distribution are marching forward towards fulfilling their new role of a frontline function that drives business growth for firms. As the pendulum swings back to a decentralized supply chain structure, we expect companies to increasingly implement technology in warehousing and distribution in the coming years. To develop the necessary capabilities of speed and flexibility, supply chain executives are strategizing to make the requisite investments in distribution networks, incorporate technology, and engage capable third-party logistics partners to harness the opportunities that lie ahead.
[Authors’ Note: The Auburn University Fusion 20/20 Supply Chain Symposium will be held on August 20th. Register at www.auburnscm.org/events]
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.